PwC to quit as auditor to Boohoo on reputation concerns
Break with controversial client follows similar Deloitte move at EG
PwC is to resign as auditor of fashion retailer Boohoo on concerns about the risks of continuing to work for the online group, which is under scrutiny for suppliers paying workers below the minimum wage.
Two people familiar with the matter said PwC, auditor since before the company went public in 2014, had signalled its intention to resign within the last month.
Manchester-based Boohoo has been accused in recent weeks of tolerating widespread abuses of employment law in its UK supply chain.
A review by Alison Levitt, a senior lawyer, found that although the company did not profit from the abuses, it certainly knew about them and had not acted quickly enough.
Boohoo’s oversight of its supply chain had been “inadequate for many years” and its internal processes were “well below the standard which would be expected of a company of its size and status”, she said.
Several aspects of the company’s wider governance have also raised eyebrows. Earlier this year it acquired the remaining one-third of fashion brand Pretty Little Thing from Umar Kamani, the son of Boohoo co-founder and executive chairman Mahmud Kamani. It said the transaction did not require shareholder approval under rules on Aim where it is listed.
Executive pay has also caused controversy, with a third of shareholders opposing the remuneration report at the company’s last annual meeting. One incentive scheme could result in Boohoo chief executive John Lyttle being handed £50m if the market value reaches £5.6bn by 2023; it is currently valued at just under £4bn.
Another plan — also predicated solely on share price performance — could generate payouts of £150m for other executives including Mr Kamani, finance director Neil Catto and Carol Kane, the other co-founder.
Boohoo said that “a process has recently commenced to tender for a new provider of audit services”. PwC declined to comment.
Big Four accounting firms have been actively reviewing potentially controversial clients in recent years. Last year, Grant Thornton resigned as auditor to Sports Direct — now called Frasers Group — after the company revealed immediately before the release of annual results that it was under investigation by the Belgian tax authority.
Earlier this week Deloitte resigned as auditor at EG Group, the petrol station empire built up by Lancashire brothers Mohsin and Zuber Issa, because of concerns that its internal controls had not developed in line with increasing revenues and complexity.
That revelation came just as the brothers, along with private equity group TDR, were confirmed as the buyers of a majority stake in Asda, the UK’s third-largest supermarket.